With major scandals affecting our MP’s, financial institutions, the media and the police it is little wonder that by the end of 2012 corporate governance was the new “black” in the business world and looks set stay. The emphasis upon appropriate corporate controls and culture has been reinforced by the highly publicised tax offensive targeting the former no man’s land of offshore companies and bank accounts.
The overriding theme is clear - times are difficult, mistakes have been made and businesses and individuals have a duty to do the right thing.
Unfortunately, there is not a lot of money available to help promote this cultural shift and so 2012 also saw publication of the government’s plans for the introduction of deferred prosecution agreements – the newest weapon in the cash strapped armoury of the Serious Fraud Office (SFO) – where, if the case is suitable, entities self reporting on fraud can hope to do a deal. It is no coincidence that this has been put in place with an anticipated 2013 focus from the SFO and its new director on enforcing the provisions of the Bribery Act.
One has only to look carefully at the UK government’s guidance on whistleblowing to see where the problems lie
The SFO’s confidential reporting hotline is also doing brisk business and the soon to be reconfigured FSA has had a whistleblowing hotline for many years. So-called “bounty payments” by HMRC have also been in the press where informants have received discretionary payments for information that has led to additional tax recoveries.
In this climate the role of the whistleblower has never been more prominent and yet UK legislation does little to recognise the increased importance of this role. Any auditor will tell you that two of the most effective weapons a business can deploy against fraud are the establishment of a zero tolerance culture backed up by a fraud reporting hotline available to employees, customers, suppliers and anyone else who has dealings with the company.
In the UK whistleblowing legislation is set out within the Public Interest Disclosure Act 1998 although this will be amended by Vince Cable’s Enterprise and Regulatory Reform Bill which is expected to become law later this year and will remove a loophole where concerns about a personal employment contract could be raised.
Unfortunately, it is proposed the whistleblower will now also have to decide what is in the public interest.
In an environment where government, regulators and prosecutors are seeking to both reinforce and enhance controls within the business and wider community a more fundamental review of whistleblowing legislation in the UK is long overdue.
One has only to look carefully at the UK government’s guidance on whistleblowing to see where the problems lie. Potential whistleblowers are invited to check their employment contract or HR department to ascertain if their company has a whistleblowing procedure.
If I were an employee I would already be worried – the process seems likely to become legal and HR departments are not renowned for supporting the employee in a matter involving the behaviour of management. What do I do if I’m not an employee but a third party or a sub- contractor and if I am an employee what do I do if there is no whistleblowing policy? Government guidance fails to clearly address these points and the law itself is unclear.
Government guidance goes on to make it clear that the preferred route for reporting is to talk to your employer (again the issue of third parties or sub-contractors is not addressed) but if one is unable to do this a whistleblower needs to speak with a “prescribed person or body”.
Prescribed persons or bodies comprise some 17 pages of government or government appointed bodies and individuals grouped under 19 sectors. It is explained that “you must make sure that you have chosen the correct person or body for your issue” and I can blow the whistle to my legal adviser when I am obtaining legal advice. There is no guidance about what to do if the sector you are involved with does not appear to be covered and the references to obtaining legal advice are unnerving.
However, a whistleblower can only approach a prescribed person or body if it is thought their employer will cover up the issue, treat the whistleblower unfairly or has not resolved an issue previously notified. The guidance goes on to deal with dismissal because of whistleblowing but this protection is only in place if the issue relates to a “qualifying disclosure”.
Surely it is time for a simplification of the entire process with a clear reporting route, a recognition that in business individuals can have a variety of work relationships other than being an employee and a helpline to assist people who are struggling to deal with the whistleblowing process and the law.
Paul Smethurst is a partner in the forensic and investigation practice at accountancy firm, Carter Backer Winter LLP